Modelling the Internet of Things: forecasted size and growth

When I was a child, I loved putting together plastic models of cars, trucks, planes and boats. Inside the cardboard box from the store I would find strangely-shaped, dull gray-colored plastic panels, flat pieces of chrome, and maybe even some translucent frosted plastic components. I would spend entire weekends following vaguely cryptic instructions showing me when to snap apart the various bits of plastic, where to apply glue to the edges, how to assemble the pieces together and what colored paint to use on the finished product.

Little did I know that 40 years later I would be researching and writing about a technology that is comprised of various technology elements integrated together – electronically glued, one might say – to create an end-to-end connected solution. The Internet of Things (IoT) in the 21st century has become the equivalent of my childhood plastic models of the 20th century.

MachNation, a specialty IoT research firm, has spent a lot of time modeling and forecasting the various parts of an IoT solution. This blog presents some of the findings from MachNation’s IoT worldwide revenue forecast.

MachNation’s IoT forecast analyze 6 layers of the IoT stack including

IoT devices – the edge-based hardware products that collect IoT data

IoT communications services – the wide-area network based communications services used to transport IoT data from devices to systems

Here are some of MachNation’s forecast findings:

According to MachNation forecasts worldwide IoT revenue will be USD98 billion in 2016 growing to USD987 billion by 2025 at a compound annual growth rate (CAGR) of 29% over the period (see figure 1). In 2016, the emerging regions of the world account for 22% of total revenue, whereas by 2025, emerging regions will account for 41% of total worldwide IoT revenue. This trend is caused by grow rates of IoT devices in the emerging world eclipsing those of the developed world, even though per unit total IoT revenue in the emerging world will only be 65% of the per unit IoT revenue in the developed world.

Interestingly, over 1/3 of total IoT revenue in 2016 will come from integration services (see figure 2). IoT solutions today are fairly integration-intensive. IoT solutions, still fairly in their infancy, requires a lot of effort to assemble. In addition, it is not possible to find pre-integrated and tested solutions for all IoT use cases, therefore, enterprises are spending a lot of time and money paying for integration services to ensure a viable technology solution. Vendors and services companies that can provide some pre-integrated, tested end-to-end IoT solutions are setting a high bar for the overall industry.

By the year 2025, MachNation expects vertical services revenues to account for almost 40% of total IoT worldwide revenue. These vertical solutions – primarily a combination of applications and ancillary services – will be available for many types of IoT use cases across many industry sectors. We anticipate productized solutions in transportation, heavy industry, construction services, clinical healthcare, factory/building automation, energy services, security/surveillance, various smart city solutions. And we also anticipate growth in IoT platform revenue.

Gluing together a plastic model – assembling the myriad miniature plastic pieces – is a great childhood activity. But in the world of IoT, sometimes being able to buy the already pre-integrated, tried and tested model is a faster, safer and less costly way to go.

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